Question: In the monetary intertemporal model, suppose the central bank issues money in exchange for capital, and rents this capital out to firms each period, thus

In the monetary intertemporal model, suppose the central bank issues money in exchange for capital, and rents this capital out to firms each period, thus earning the market real interest rate r on the capital. Over time, as the central bank earns interest on its capital holdings, it uses these returns to retire money from the private economy. What are the long-run effects? Is the outcome economically efficient? Explain your results.

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